Berge Bulk Shipping Pte Ltd v TPT Shipping Ltd

[2020] NZHC 2627

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2020-470-0089

[2020] NZHC 2627

BETWEEN

BERGE BULK SHIPPING PTE LTD

Applicant

AND

TPT SHIPPING LTD

Respondent

Hearing:	5 October 2020
Counsel:	GP Blanchard QC, KFT Stolberger and BC Versfelt for Applicant GK Holm-Hansen and E R Woods for Respondent
Judgment:	7 October 2020

JUDGMENT OF BREWER J

This judgment was delivered by me on 7 October 2020 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Lowndes Jordan (Auckland) for Applicant Hesketh Henry (Auckland) for Respondent

BERGE BULK SHIPPING PTE LTD v TPT SHIPPING LTD [2020] NZHC 2627 [7 October 2020]

Introduction

[1]    The applicant (“Berge”) applies for an interim injunction to enforce a Letter of Indemnity (“LOI”). The respondent (“TPT”) does not challenge the validity of the LOI. It does not argue it is not bound by it. TPT’s ground of opposition to the application is that this Court does not have jurisdiction to grant interim relief. Jurisdiction, TPT submits, is vested exclusively in the High Court of Justice of England.

Background

[2]    The MV “TS Index” (“Vessel”) has been arrested by order of this Court. She is berthed in Tauranga, New Zealand.

[3]    The arrest was on the application of Excel Exports Co (S) Pte Ltd (“Excel”) which claims to be the legal holder of bills of lading relating to cargo. Excel claims that its cargo was not delivered as required.

[4]    The cargo in question (or part of it) was carried by the Vessel when Berge was the time charterer and TPT was the voyage charterer. The original of the bill of lading was not available when the Vessel arrived at the nominated port in India to discharge the cargo. Accordingly, Berge required TPT to produce a letter of indemnity to Berge’s benefit before discharging the cargo. TPT produced the LOI.

[5]The LOI is in a standard form and contains these obligations:

2.In the event of any proceedings being commenced against you or any of your servants or agents in connection with delivering the cargo without production of the original bill of lading, as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3.If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the ship (whether by virtue of a caveat being entered on the ship’s registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in

respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

[6]    Berge, on the same day TPT produced its LOI, produced an identical LOI “up the chain” to the party from which Berge had its time charter. That party has required Berge to give security in the terms of Berge’s LOI. Berge, in turn, has required TPT to provide security in terms of its LOI. Upon TPT failing or refusing to do so, Berge commenced this proceeding seeking the following orders:

1.1shall provide forthwith such bail or other security as may be required to secure the release of the M.S. “TS Index” (Vessel), or if such bail or other security has already been provided by another party, to provide forthwith such substitute security to replace security that may have been provided by another party to secure the release of the Vessel from arrest under the Warrant of Arrest dated 17th September 2020 issued by the Registrar of the High Court of New Zealand at Auckland in proceeding No CIV -2020-404-001719; and

1.2upon a demand to do so from the Applicant, the Respondent shall supply, or procure the supply directly to the Applicant of, sufficient funds to defend any proceedings brought against the Applicant in connection with the delivery of its Cargo.

[7]As I will come to, Berge now seeks a modified version of the first order.

Discussion

[8]    TPT appears under protest to jurisdiction.1 It seeks an order that the proceeding be dismissed or stayed on the basis that the Court has no jurisdiction:

(a)As between the Applicant and Respondent, the contractual scheme of and background to the subject dispute provides for resolution in the United Kingdom;

(b)The specific terms of the letter of indemnity confers exclusive jurisdiction on the High Court of Justice of England;

(c)The Applicant has, in any event, submitted to, invoked and/or made a positive election confirming the parties’ choice of jurisdiction as being the High Court of Justice of England;

(d)It is in the overall interests of justice that the matter be determined by the High Court of Justice of England.

1      High Court Rules 2016, r 5.49(1).

Must the dispute be resolved in the United Kingdom?

[9]Clause 60 of the Voyage Charter between Berge and TPT provides:

Any dispute arising from or in connection with this Charter Party shall be referred to arbitration in London. In the event of such dispute, the parties shall endeavour to agree on the appointment of a sole arbitrator or, failing agreement on the appointment of such arbitrator within 14 days of one party calling on the other to do so, such sole arbitrator shall be appointment by the London Maritime Arbitrators Association. The decision of the sole arbitrator shall be final and binding.

[10]   The Voyage Charter further notes at clause 61 that it shall be governed “in all respects by the law of England”.

[11]   The Voyage Charter also provides for a process of issuing letters of indemnity if original bills of lading are not available when the Vessel arrives at a discharge port.2

[12]The LOI provides:

7.This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

[13]   In Clearlake Shipping Pte Ltd v Xiang Da Marine Pte Ltd, the Court had to consider how a jurisdiction clause, giving exclusive jurisdiction to the “High Court in London”, interacted with the jurisdiction clause in a letter of indemnity which is in identical terms to the one at issue here.3 The Judge, Mr Justice Bryan, having quoted the jurisdiction clause in the letter of indemnity, said:

If it had not said the words, which I have already highlighted, “at your request”, that would clearly be an exclusive jurisdiction clause. However, because of the addition of the words “at your request”, it is at least strongly arguable and, indeed, may be the better construction as a matter of English law, that the obligation created on its face would be non-exclusive at common law on the basis that it contains an intransitive obligation to submit to the English jurisdiction rather than a positive obligation to refer disputes there or on the basis that, by virtue of the words as I have just identified, “at your request”, the clause applies to the giver of the indemnity (that is Clearlake) and not to the recipient (Xiang Da).

2      Clause 67.

3      Clearlake Shipping Pte Ltd v Xiang Da Marine Pte Ltd [2019] EWHC1536 (Comm).

[14]   Mr Holm-Hansen for TPT submits that the claim for interim injunction is only a small part of a much larger, and developing, dispute between multiple parties. There are at least three letters of indemnity – the one I have referred to as being issued by Berge “up the chain”, the LOI, and a “down the chain” letter of indemnity issued by Amrose Singapore Pte Ltd in favour of TPT. The jurisdiction clauses are identical. Mr Holm-Hansen says it is inevitable that the wider disputes will be determined by the High Court of Justice and it would be wrong for this claim to be adjudicated in New Zealand. It is not desirable, he submits, for a New Zealand Court to consider aspects of English law when the English Courts are going to have to deal with the same aspects.

[15]   Further, Mr Holm-Hansen submits that the provisions in the Voyage Charter referred to at [9] and [10] above amount to the grant of exclusive jurisdiction to the Courts of England:

20. It is well established that the proper approach to construction of jurisdiction agreements is to “identify the meaning which the jurisdiction clause would reasonably be understood to bear in its context”4 and to construe the jurisdiction clause “broadly and generously”. There is a “strong presumption that rational businessmen intend all questions arising out of a legal relationship to be determined in the same forum”.5

[16]TPT summarises their overall submissions as follows:

34.The jurisdiction clause in the letter of indemnity confers exclusive jurisdiction on the High Court of Justice of England in the current circumstances for the following reasons:

(a)The reference to English jurisdiction does not require an express reference to “exclusive jurisdiction” for it to be so;

(b)The fact that English law applies is a strong indicator that it was the intention of the parties for the English Courts to have exclusive jurisdiction;

(c)The fact that the provider of the indemnity has no choice in the submission of jurisdiction to the English Courts strongly suggests that it has exclusivity of disputes arising under the indemnity;

4      Global Maritime Investments Cyprus Ltd v O.W. Supply & Trading A/S (under konkurs) [2015] EWHC 2690 (Comm).

5      Clearlake Shipping Pte Ltd v Xiang Da Marine Pte Ltd, above n 3, at 43 and 47.

(d)The jurisdiction clause is specific. It does not reference English Courts generically, but expressly identifies the High Court of Justice in England;

(e)The surrounding circumstances confirm the parties reasonably intended the English Courts to be conferred jurisdiction:

(i)The Voyage Charter, under which the indemnity was given, is subject to English law and arbitration in London;

(ii)The bills of lading in respect of which the indemnity was given is subject to English law and arbitration in London;

(iii)English Courts have jurisdiction over London arbitration under s 105 of the English Arbitration Act 1996;

(iv)The Time Charter is subject to English law and arbitration in London;

(v)The parties’ conduct, as further detailed below, confirms their reasonable intention that English law and High Court jurisdiction applies.

[17]   In my view, the purpose of the LOI was to prevent the very situation for which TPT is contending. The Vessel has been arrested because a party claims rights under a bill of lading which was not produced by TPT at the point the cargo was to be discharged. Yet TPT wanted the cargo discharged, and the production of the LOI was a contractually recognised way of accomplishing that. It addressed the risk Berge ran in discharging cargo without the original of the bill of lading. One of the chief risks was that a party claiming rights under the bill of lading would later arrest the Vessel. The LOI addressed that risk by TPT undertaking “to provide on demand such bail or other security as may be required … to secure the release of such ship …”.

[18]   When ships are arrested, losses, and liabilities, multiply. A main purpose of the LOI was to create a mechanism for the speedy release of the Vessel if it were arrested because cargo was discharged without TPT having produced the original bill of lading.

[19]   Against this background, I respectfully agree with Mr Justice Bryan that the addition of the words “at your request” creates, on their face, a non-exclusive

jurisdiction where Berge is able to choose whether or not to submit to the jurisdiction of the High Court of Justice of England. It makes commercial sense that if the Vessel were to be arrested in a port beyond the jurisdiction of the High Court of Justice of England the holder of the LOI could apply for relief to a Court which does have jurisdiction. TPT is a New Zealand company subject to the jurisdiction of this Court.

[20]   This is not a situation like the one addressed in Clearlake. It is not a matter of reconciling competing jurisdiction clauses where multiple parties have issued more than one proceeding. Here, there is one claim for interim relief in a substantive proceeding issued by one party against another. There is a clear interpretation of the jurisdiction clause available which permits Berge’s claim to proceed. If I do not accept jurisdiction, then the result will be delay and the assumption of jurisdiction by a Court6 which cannot directly enforce any relief it might grant to Berge.

[21]   The remaining point under the question of jurisdiction is whether Berge has, in any event, requested TPT to submit to the jurisdiction of the High Court of Justice of England and thus irrevocably elected that jurisdiction.

[22]   TPT relies upon emails sent by Berge’s lawyers in Singapore, Stephenson Harwood LLP, to TPT.

[23]   On 25 September 2020, the day after Berge was notified of the arrest of the Vessel, Mr Simpson7 of Stephenson Harwood wrote to TPT calling on it to comply with the LOI. In the email, Mr Simpson warned:

If [TPT fails] to do so, we have standing instructions to commence proceedings under the LOI to enforce [Berge’s] rights in the English High Court, including but not limited to obtaining an order for a mandatory injunction to compel [TPT] to provide security to Excel.

[24]   The next day, there was a further communication from Mr Simpson in similar terms:

We are further prepared to commence proceedings in the London High Court to obtain a mandatory injunction against TPT on Monday, if we do not receive

6      TPT has undertaken not to contest the jurisdiction of the High Court of Justice of England.

7      Mr John Paul Geoffrey Simpson has filed an affidavit in support of the application for injunctive relief without notice dated 30 September 2020.

the requested confirmation from TPT in respect of the Vessel’s release. Please be guided accordingly.

[25]   In my view, there is nothing in the point raised by TPT. Berge’s lawyers were speaking of an intention. There was no crystallisation of any provision conferring a right on TPT, or conduct giving rise to some kind of estoppel.

[26]   I find that although the Voyage Charter may well provide for disputes to be resolved in the United Kingdom, the specific terms of the LOI confer on Berge the right to enforce the LOI in the jurisdiction most likely to result in the LOI being given immediate effect when it comes to releasing the Vessel from arrest. Berge has not made a positive, binding election to confer jurisdiction on the High Court of Justice of England. Due to the purpose of the LOI, it is in the overall interests of justice that the matter be determined by this Court.

[27]   I was advised this morning by Berge’s New Zealand solicitors that Berge has now provided security for the release of the Vessel in fulfilment of its obligations under its own letter of indemnity produced “up the chain” as I mentioned in [6] and [14]. Berge maintains its application, albeit in amended form, to take account of this development.

[28]   I find that the fact the Vessel will be released from arrest because Berge provided security does not mean the Court no longer has jurisdiction to determine Berge’s (altered) application. The LOI does not cease to apply if the party entitled to its benefit has had to provide security for the release of the vessel. Berge is entitled to seek immediate relief from the financial consequences of the step it has been forced to take. It is entitled to sue TPT in a Court which has jurisdiction over TPT.

[29]   I will have to consider, however, whether Berge’s provision of security has significance for the issue of whether the interim injunction should be granted.

Should the interim injunction be granted?

[30]   The legal approach to an application for an interim injunction is substantially the same in the United Kingdom and in New Zealand. The leading case remains American Cyanamid Co v Ethicon Ltd.8

[31]   It is ineluctable there is a serious question to be tried. The substantive claim is for the enforcement of the LOI. TPT does not suggest the LOI is not valid and binding on it.

[32]   There is no distinction in principle between the making of a mandatory interim injunction and the making of a restraining interim injunction. What matters is how appropriate the making of the injunction is to the factual and legal circumstances of the case.

[33]   The context of the case is important. Here, the main purpose of the LOI is to ensure the speedy release of an arrested ship if the arrest falls within the provisions of the indemnity. In Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd, a time charterer sought an urgent mandatory injunction compelling the voyage charterer to provide security to enable the release of the MT “Miracle Hope” which was then under arrest in Singapore.9 The respondent had provided an indemnity similar to the one in this case. The Court noted the undisputed principles of law, including:10

Previous case law indicates that the obligations imposed on the indemnifier under a maritime contract of indemnity are amenable to enforcement by a mandatory injunction, with damages being an inadequate remedy: see Harmony Innovation Shipping Ltd v Caravel Shipping Inc [2019] EWHC 1037 (Comm) at §30; The Bremen Max [2009] 1 Lloyd’s Rep 81 per Teare J at §12; and The Laemthong Glory (No.2) [2005] 1 Lloyd’s Rep 632 per Cooke J at §§51-52.

[34]   Harmony Innovation Shipping Pte Ltd v Caravel Shipping Inc (The “Universal Bremen”) also dealt with the urgent enforcement of letters of indemnity provided to a

8      American Cyanamid Co v Ethicon Ltd [1975] AC 396.

9      Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd [2020] EWHC 726 (Comm).

10     At 31.

sub-charterer of a vessel to secure the discharge of cargo.11 The Court addressed the adequacy of damages as a remedy:12

Mr Young QC then submitted that damages would be an adequate remedy. In the circumstances this would be contrary to the authorities, in particular Cooke J’s judgment in Laemthong International Lines Co Ltd v Artis (The Laemthong Glory) (No 2) [2005] 1 Lloyd’s Rep 632. To take a contrary view would to my mind also undermine the very purpose of a letter of indemnity. Clause 3 is an additional provision to the indemnity provided for in clause 1. Its purpose is to ensure that security is advanced so that a vessel which has been arrested can be released to continue trading.

[35]   In Laemthong International Lines Co Ltd v Artis & Ors (The “Laemthong Glory”) (No 2), Mr Justice Cooke held:13

49.        I consider that the owners are right here in saying that a failure to arrange the provision of security by either receivers or charterers in accordance with their letter of indemnity obligations so negates the object of the letters of indemnity that the Court ought to grant specific performance. The very purpose of the letter of indemnity was to avoid the detention which has actually occurred. This clause is of a different nature therefore from those which constitute the ordinary, primary obligations to be found in most contracts.

50.        Whilst Mr Lewis is right in saying that contracts provide for primary obligations, and this is a primary obligation and therefore it is not right simply to look at the clause and say that it made provision for a certain result and therefore damages are not an adequate remedy (as performance of a secondary liability) this particular clause does fall into a different category from most.

51.        Whereas damages may constitute an adequate remedy for failure to perform many primary obligations, the whole point of the letters of indemnity was to replace secondary liability under any suit for damages for detention by the primary performance of the obligation to ensure release of the vessel, so that such a suit was unnecessary. It would, in such circumstances, be inequitable not to grant specific performance to require fulfilment of that obligation and then to leave the owners to a remedy in damages for detention, or even damages for the loss of the ship, which was the very thing that the letters of indemnity were intended to avoid. Furthermore, I can see no reason for distinguishing between the position of the charterers and the receivers in this regard.

[36]   In light of these authorities, I would grant a mandatory interim injunction to give effect to the LOI so as to procure the release of the Vessel from arrest. But, that

11     Harmony Innovation Shipping Pte Ltd v Caravel Shipping Inc (The “Universal Bremen”) [2019] EWHC 1037 (Comm); [2020] 1 Lloyd’s Rep 206.

12     At 30.

13     Laemthong International Lines Co Ltd v Artis & Ors (The “Laemthong Glory”) (No 2) [2004] EWHC 2738 (Comm).

is no longer necessary because Berge itself has provided security to achieve that purpose. The order now sought by Berge is:

The Respondent shall forthwith provide substitute security, or bail, to replace the security provided by the Applicant to secure the release of the vessel M.S. “TS Index”, from arrest under the Warrant of Arrest dated 23rd September 2020 issued by the Registrar of the High Court of New Zealand at Auckland in proceeding No CIV-2020-404-001719.

[37]   In my view, the fact that Berge has provided security does not affect the principle that if a Court does not order immediate compliance with an LOI then the very purpose of the LOI is undermined. Nor does the fact that Berge has mitigated its liability reduce its right to rely upon the LOI.

[38]   In Farenco Shipping Co Ltd v Daebo Shipping Ltd (The “Bremen Max”), a similar situation arose.14 A ship was arrested, the owners made demand on the LOIs produced by the charterers and the charterers failed or refused to provide the security necessary to release the ship from arrest. As a result, the owners provided the security. An interim mandatory injunction was granted to the owners requiring the charterers to provide the funds necessary to replace those deposited by the owners. There was an expedited trial to consider (inter alia) whether the obligation in the letter of indemnity to provide such bail or other security was no longer a current obligation, the release of the vessel having been secured.

[39]   Mr Justice Teare did not accept the submission that the act of the owners in putting up security to secure the release of the vessel, in circumstances where the charterers had failed to do so in breach of their obligation, removed the obligation.

[40]Mr Justice Teare said:

21.        The intention and commercial purpose of clause 3 of the LOI is that the shipowner should not have to suffer the arrest of the vessel and that any bail or other security to prevent the arrest of the vessel should not be put up by the shipowner but by the charterer.

22.        The action of the owners in putting up security had the effect of ending the detention of the vessel and to that extent mitigated the loss caused by the charterers’ breach. But the charterers remained in breach of their obligation.

14     Farenco Shipping Co Ltd v Daebo Shipping Ltd (The “Bremen Max”) [2008] EWHC 2755 (Comm); [2009] 1 Lloyd’s Rep 81.

The action of the owners did not discharge the obligation of the charterers to put up bail or other security. That obligation had accrued. The action taken by the owners to mitigate their loss cannot discharge that obligation or provide the charterers with a defence to the charge that they remained in breach of their obligation to provide bail or other security. Were it to do so the commercial purpose and intention of the clause would be frustrated; for the owners would have to incur the cost of putting up the bail required to secure the release of the vessel. It is correct that the owners would have a remedy in damages for the cost of putting up bail but the commercial purpose and intention of clause 3 was that the owners should not have to incur that cost at all.15

[41]   TPT does not dispute that it is bound by the LOI. The LOI was given to save Berge from harm resulting from it discharging the cargo at TPT’s request without the original of the bill of lading. Berge made demand on TPT to perform its obligations under the LOI. TPT failed or refused to do so. Berge has now put up security to mitigate its liability. That does not alter TPT’s obligations under the LOI. If it did, the whole purpose of the LOI would be undermined.

[42]   I find the balance of convenience clearly favours the granting of the amended mandatory interim injunction sought. Damages would be an inadequate remedy in these circumstances. For the same reasons, overall justice will be served by granting the interim injunction.

[43]   The final issue regards the second order sought, namely the provision of sufficient funds to defend any proceedings brought against Berge in connection with the delivery of the cargo.

[44]   Mr Holm-Hansen resists this part of the application on the basis there is no evidence before the Court of what might be “sufficient”. In Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd, the “return date” judgment of the case referred to at [33], the provision of defence funds was a live issue.16 The original injunction required Clearlake (and a separate party) “upon a demand to do so from Head Owners … to supply directly to Head Owners sufficient funds to defend any proceedings brought by Natixis against Head Owners in connection with the delivery

15 Similarly, in Harmony Innovation Shipping Pte Ltd v Caravel Shipping Inc (The “Universal Bremen”) [2019] EWHC 1037 (Comm); [2020] 1 Lloyd’s Rep 206, Sir Ross Cranston (a retired Judge of the Commercial Court) rejected a submission that the requirement to provide security might be satisfied by the parties in the chain giving security up the chain.

16 Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd [2020] EWHC 995 (Comm).

of the Cargo.”17 However, the point of the judgment was the reasonableness of the sum of the funds demanded. The Court determined the issue with reference to whether the funds demanded were reasonable or not.

[45]   In my view, the granting of sufficient funds to defend a claim to which the indemnity applies is part and parcel of the overall purpose of the LOI which is to save Berge harmless from taking the risk at TPT’s request to discharge cargo without the original bill of lading. There is no need to quantify the amount of funds at this stage. If demand is made on TPT and TPT decides the demand is unreasonable then, as is often the case with costs, the Court will determine reasonableness. I will make the order accordingly.

Decision

[46]The application for an interim injunction is granted. I order:

1.The Respondent shall forthwith provide substitute security, or bail, to replace the security provided by the Applicant to secure the release of the vessel M.S. “TS Index”, from arrest under the Warrant of Arrest dated 23rd September 2020 issued by the Registrar of the High Court of New Zealand at Auckland in proceeding No CIV-2020-404- 001719.

2.Upon a demand to do so from the Applicant, the Respondent shall supply, or procure the supply directly to the Applicant of, sufficient funds to defend any proceedings brought against the Applicant in connection with the delivery of its Cargo.

3.The parties have permission to apply to vary or discharge this order.

4.Any application by the Respondent to set aside or vary this order shall only be made after at least 48 hours’ notice has been given to the Applicant’s solicitors.

Costs

[47]   In the ordinary course of things, TPT must pay Berge’s costs. I direct Berge to file and serve its memorandum by 4 November 2020 and TPT to file its memorandum in reply by 2 December 2020.

Brewer J

17     At 77.